Local currency government bonds have been a port in the emerging market (EM) storm during the past year, as investors have revised down their expectations for policy rates. While they are now generally in agreement with our long-standing dovish views on monetary policy, we still see room for some further reduction in rate expectations in Brazil and Russia over an 18 month horizon. By contrast, we think that the fragile lira will eventually force Turkish rates higher than investors anticipate.
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